April 14, 2024
US job growth expected to slow slightly in January

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth is likely to slow modestly in January as a resilient economy and strong worker productivity encouraged most businesses to retain their workers, a trend that could see the economic expansion continue this year. Can keep.

The Labor Department’s closely watched employment report on Friday could further dampen financial market expectations of an interest rate cut in March, with annual wage growth forecasts maintaining their solid pace last month.

The Federal Reserve made no changes in interest rates on Wednesday. Fed Chairman Jerome Powell, broadly supportive of the economy’s strength, told reporters that interest rates have peaked and will decline in the coming months.

Most economists were dismissive of recent high-profile layoffs, including 12,000 job cuts announced by United Parcel Service this week, arguing that the focus should be on worker productivity, which has exceeded the 3% annual growth rate for three consecutive quarters. and labor costs have decreased.

“There are increasing reports of some layoffs, but I don’t think there’s been any significant change in terms of the overall momentum of the economy,” said Brian Bethune, an economics professor at Boston College. “If workers are productive, why wouldn’t you want to hire them?”

Nonfarm payrolls are expected to have increased by 180,000 jobs last month, following a 216,000 increase in December, according to a Reuters survey of economists.

Estimates ranged from 120,000 to 290,000. Employment gains in 2023 will be below the monthly average of 225,000 jobs, but well above the approximately 100,000 per month needed to sustain growth in the working-age population.

Economists estimate that layoffs in January were lower than normal compared to the end of the year. This will increase the number of jobs taking into account seasonal fluctuations and will also reduce the disruption caused by the winter storms that hit large parts of the country in mid-January. However, blizzards can shorten the average work week.

Employers are generally wary of sending workers home after difficulties finding workers during and after the COVID-19 pandemic. But some companies, which enjoyed a boom in business during the pandemic, are laying off employees once the situation returns to normal.

Beth Ann Bovino said, “While businesses have begun to reduce the size of their workforce by either reducing temporary hires or reducing the number of hours their employees work per week, they have yet to lay off employees. “Haven’t done it.” , chief economist of the US Bank in New York.

“That’s because, looking to 2022, businesses realize that retaining workers to anticipate demand growth, as we saw last year, may come in handy.”

hope for widespread benefits

There was a possibility of job growth in private and public sectors last month. Economists will be eager to see whether job growth will continue for several months in 2023 after being concentrated in less than a handful of sectors, including government, leisure and hospitality, as well as healthcare.

Along with the January employment report, the government will publish revisions to its annual “benchmarks” and update the formulas used to smooth the data for regular seasonal fluctuations in the establishment survey.

The government estimated last year that the economy created 306,000 fewer jobs than previously thought in the 12 months to March 2023. Payroll data from April to December may also be revised. The benchmark revisions will also affect average hourly earnings and the workweek.

Average hourly earnings are projected to rise 0.3% in January after rising 0.4% in December. This will keep the annual salary increase unchanged at 4.1% in January.

Annual wage growth will remain well above its pre-pandemic average and in the 3.0% to 3.5% range that most policymakers see as in line with the Fed’s 2% inflation target. But some economists are not worried.

“Clearly higher productivity growth means the Fed shouldn’t be too concerned about still-strong wage growth dynamics,” said Oscar Munoz, chief U.S. macro strategist at TD Securities in New York.

According to CME Group’s FedWatch tool, financial markets have scaled back their expectations for a rate cut in March and now expect the US central bank to start lowering borrowing costs in May. Starting March 2022, the Fed has raised its policy rate by 525 basis points to a 5.50% range from the current 5.25%.

The new population estimates will also be included in the household survey, from which the unemployment rate will be derived. January’s unemployment rate and other measures from the household survey will not be directly compared with December’s.

The unemployment rate is expected to increase from 3.7% to 3.8% in December. This has increased from a five-decade low of 3.4% last April. After the big decline in December, the flow in labor force as well as domestic employment will also be monitored.

(Reporting by Lucia Mutikani; Editing by Jonathan Oatis)

Source: ca.finance.yahoo.com

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